In our latest UK Capital Markets Review & Outlook, we explored the continued strong performance of the UK commercial real estate investment market in the first half of 2018, despite the unfavourable political climate. We recorded £27.0bn of commercial real estate transactions in H1, 7% ahead of the equivalent period last year and 32% ahead of the 10-year H1 average.
Overall volumes were supported by a strong second quarter, in which £14.6bn was traded. Central London saw a particularly strong Q2 volumes of £7.3bn, following disappointing Q1 volumes of £3.6bn. The Q2 figure was boosted by a number of large City office deals, including CK Asset Holdings’ £1.0bn purchase of 5 Broadgate and Ho Bee Land’s £650m acquisition of Ropemaker Place.
The regional markets also saw an uplift in investment activity with £9.1bn traded in H1, 23% ahead of last year’s total. Scotland was the standout performer with £1.4bn of transactions, the highest ever H1 figure and 86% ahead of H1 2017. Other key regions also saw significant increases, with £2.1bn transacted in the South East (up 14%) and £1.2bn transacted in the North West (up 46%).
Looking ahead, we outline a number of key trends for the second half of the year, highlighting the increased downside risk caused by the Brexit process, but also the sustained appeal of the UK market in spite of this. Private Equity funds continue to sit on a mountain of dry powder and target a diverse range of assets, including student housing, hotels and multi-let industrial, while the alternative sectors remain at the top of many investor’s wish lists.
The report also sees the release of results from JLL’s latest Investor Confidence Survey. Highlights from the survey include: 59% of respondents see total returns over the next 12 months being slightly lower than the last 12 months, 39% believe new activity will be focussed on the top regional centres, ahead of London & the South East (37%), while 74% have a more negative or equally negative view of Brexit than 12 months ago, with 26% holding a more positive or equally positive view.
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